Proposed pension reform good news for workers

Thanks to pension reforms, 18 million workers — more than half of the UK’s total — will be unaffected by tax penalties if they choose to take out their pension before the age of 55, Chancellor George Osborne has announced.

Workers consulted

The decision to change the reforms, which would have originally affected fewer workers, was taken after the Government consulted with employers and industry groups.

“It’s right to support hard-working people that have taken the long-term decision to save for their future and I’m pleased that the responses we had to our proposals on making pensions more flexible have been overwhelmingly positive,” said the Chancellor.

Who’s affected?

Originally, the reform only affected defined-contribution workplace pensions owners: workers who saved by investing in annuities on retirement. Now, however, funded defined-benefit pensions will also be changed: pensions that are based on a worker’s average income.

Businesses that sell annuities to defined-contribution workplace pensions owners can also market more complex products, but the Government has said it will offer free guidance to those uncertain — a service funded by a levy.

More good news for workers

As well as pensions reforms, workers can be positive about potential wage increases. A recent increase in inflation from 1.5% to 1.9% suggests that wages might also rise. In fact, a recent Institute of Directors (IoD) survey revealed that 36% of employers plan to match wage increases to inflation rates, while 29% want to raise wages at a higher rate.

How we can help

Planning for the future is an important part of life and at Jordans we are committed to ensuring our clients receive the help they need to deal with planning for the cost of long term care. If you would like to discuss this further please call 0330 300 1103 or email peter.kirrane@jordanssolicitors.co.uk